The sore spot became evident after the Web search leader decided last month to reset the price of underwater employee stock options, in light of a more than 50 percent drop in Google’s share price from its November 2007 peak of $747.24.

The move, which will result in a $400 million charge, provoked grumbling among some investors who are not being similarly compensated.

While investors have griped about Google’s unconventional actions in the past, such as its refusal to provide earnings forecasts, its appreciating stock price had muted most of the discord. But with shares well off highs, some analysts say Wall Street may be less willing to give Google a pass this time.

“I don’t have as good a feeling as I did before about the company,” said Jerry Dodson, chief executive of Parnassus Investments, which bought Google shares when they were priced in the low $400s. The stock was trading at $343 on Thursday.

For now, Dodson said he is prepared to live with Google’s offer to reset the price of employee options with a strike price below Google’s closing price on March 6. “But it puts all of us that have invested in the company en garde,” he added.

Patrick McGurn, special counsel of RiskMetrics Group, which advises institutional investors on governance and proxy issues, said Google has some fence-mending to do, as there may be an outpouring of discontent at the company’s annual shareholder meeting, which is usually held in May.

McGurn said the option repricing plan is clearly not shareholder friendly, but it is too soon to say whether his firm might recommend shareholders to take any action.

TRACK RECORD

Stock options provide incentives for employees to work hard and share in profits. But the option becomes worthless when the market price falls below the exercise price. Google has said about 85 percent of employees have underwater options.

“Because motivating and retaining employees is a good thing both for those employees and our shareholders, we believe this exchange works for all involved,” said Google spokeswoman Jane Penner.

Many investors feel Google’s plan, which lets employees exchange underwater options at a one-to-one value, is overly generous and not necessary given the difficult job market.

But analysts say the issue would quickly be forgotten if Google resumed its track record of impressive growth and innovative products once the economy began to recover.

“As long as the company continues to execute, I think shareholders will give them a lot of leeway,” said UBS analyst Ben Schachter.

Indeed, Google shares have risen about 12 percent since it delivered better-than-expected quarterly results in January, when it detailed the option exchange plan. That compares with a flat Nasdaq composite index .IXIC over the same period.

That said, it’s still unclear whether Google can buck the recession, or whether it’s simply a matter of time before it feels the effects of wide corporate cuts on advertising spending.

In the fourth quarter, Google’s revenue grew 18 percent to $5.7 billion, much better than rivals including Yahoo Inc YHOO.O, Time Warner Inc’s TWX.N AOL and IAC/InterActiveCorp IACI.O. But growth was below the 30 percent-plus rates Google had delivered in previous quarters.

The company is already taking a harder look at costs, pulling the plug on various projects and slowing its hiring.

DUAL CLASS SHAREHOLDER STRUCTURE

Still, Google provides various employee perks, such as free all-you-can-eat meals at several on-campus restaurants, which might strike some as extravagant in the tough economy.

And some say Google is inherently unreceptive to investor input. Its dual-class share structure gave three individuals — co-founders Sergey Brin and Larry Page, and Chief Executive Eric Schmidt — 67 percent of voting rights as of 2008.

“Having that unequal voting right in and of itself tends to indicate that shareholders definitely take a back seat,” said McGurn of RiskMetrics.

Critics of Google fault it for not holding a shareholder vote on the options exchange plan, as most companies are required to do under Nasdaq and New York Stock Exchange rules.

It is possible for a company to avoid a shareholder vote when its stock option plan explicitly allows repricings, as is the case with Google’s 2004 stock option plan.

“The (institutional shareholders) really, really don’t like repricings, particularly those that don’t get shareholder approval,” said Michael Frank, a partner in the employee benefits and executive compensation group at the Morrison Foerster law firm.

“So they may tend to vote against a future proposal with respect to the plan; for example if a company wants to add shares to the plan,” Frank said, speaking generally and not about the Google situation in particular.

Given the dual-class share structure, investors may have little recourse other than a symbolic protest vote.

Those who invest in Google signed away a lot of their rights to complain about decisions, said Ironfire Capital’s Eric Jackson, who was involved in an activist campaign directed at Yahoo in 2007, but who does not have a position in Google.

“Many investors have chosen to do that because they assumed growth is going to be fantastic and they wanted to be along for the ride,” he said. “It’s instances like this that cause shareholders to take a step back and think about it.”